That pushed the province’s unemployment rate up to 8.1 per cent — surpassing the national rate of 7.3 per cent.

In Waterloo Region, the unemployment inched up, to 6.8 per cent from 6.7 per cent in September. Statistics Canada said the number of unemployed increased marginally to 19,900 while the number of people working fell by 4,500 to 271,100.

Overall, Canada’s jobs market suffered the biggest setback in almost three years, shedding 54,000 jobs in October — all full-time and concentrated in Ontario’s manufacturing and construction industries.

The figures are the latest piece of bad news for the Liberals, who were reduced to a minority government in the Oct. 6 election.

Last week, the government revealed this year’s deficit would rise to $16 billion and that the province’s economy shrank in the second quarter.

The 0.3 per cent drop in gross domestic product, which followed seven consecutive gains, was blamed on a weakened U.S. economy and an auto parts shortage caused by the tsunami in Japan.

Economic Development Minister Brad Duguid pointed to the same factors in explaining the latest round of job losses.

“We’re up by about 60,000 net jobs, but as we’ve taken three steps forward with our economy and our recovery, from time to time we’re taking a step back,” he said.

“In this case, it’s a reflection of the after-effects of the tsunami and the supply chain globally that’s been impacted, as well as the challenges with the U.S. economy that Ontario continues to be susceptible to.”

Ontario can still take credit for half the jobs that were created in Canada this year, Duguid added.

“While this month is a bit of a setback, we’re going to continue to pursue the policies that will continue to build a strong economy here in this province,” he said.

But many of those new jobs don’t pay as well as the ones they’re replacing, said NDP Leader Andrea Horwath.

A report from CIBC earlier this week pointed out that most of the new jobs have been of a lower-paying variety.

The stunning jobless figure proves that Premier Dalton McGuinty’s jobs strategy — which included imposing the HST and cutting corporate taxes — has been an “utter failure,” she charged.

“That’s why we think a more targeted approach is appropriate, where we’re actually rewarding job creators with those tax credits.”

Horwath also noted that Manitoba, which recently re-elected an NDP government, managed to create 1,600 jobs while staying away from the HST and corporate tax cuts.

“Dalton McGuinty is ignoring the fact that his strategies aren’t working,” she said.

“He’s stubbornly sticking to a plan that is failing Ontarians, that’s creating a situation where people are losing decent full-time work and having to cobble together two or three part-time jobs just to make ends meet.”

Progressive Conservative leader Tim Hudak warned that rising unemployment shows Ontario is in the midst of a “jobs crisis” at a visit Friday to NMT Machining Group Inc. in Kitchener.

He was joined by Kitchener-Conestoga MPP Michael Harris and Kitchener-Waterloo MPP Elizabeth Witmer.

Witmer called Friday a “sad day” for Ontario, which shed jobs as the rest of the country was gaining them.

“Those are not jobs a government can create,” said Witmer, adding that the government’s role is to create an environment where a strong public sector can fuel growth.

She added that the Progressive Conservative party platform outlined many possible solutions to unemployment rate: low corporate tax rates, eliminating the debt and deficit, and reforming the province’s apprenticeship programs, to name a few.

While Ontario “took a step backwards” with a contraction of 38,700 jobs, more than 131,000 have been created this year — many of which were full-time, said TD economist Sonya Gulati.

“This showing represents an impressive comeback for a province most wounded by the financial crisis,” she wrote Friday in a note to clients.

“Still, the path ahead looks to be anything but smooth sailing for manufacturing-heavy Ontario.”